Case study · Footscray
Quoted to $920,000. Offered to us at $870,000 before auction. Secured for $842,000 by not bidding at all.
| Suburb | Footscray, VIC 3011 |
|---|---|
| Quoted range, top end | $920,000 |
| Pre-auction offer to us | $870,000 |
| Purchase price | $842,000 |
| Below the pre-auction offer | $28,000 |
| Below the top of the range | $78,000 |
| Buyers | A couple buying their first home together |
| Bids placed by us | None |
We ran the search and found the property. Before auction day the agent came to us and offered it at $870,000, fifty thousand under the top of the quoted range.
For a first home buyer that is an enormously tempting phone call. You have been looking for months, here is the house, and here is a number below the range with the competition removed. Most buyers take it. That is exactly why agents make the offer.
We told our clients not to.
The market at that point was softer than it had been. A pre-auction offer in a soft market is not generosity, it is a vendor and an agent trying to avoid finding out what the auction will actually do. If the property was worth $870,000 to them on the Thursday, it was worth less than that on the Saturday.
The risk of being wrong was real and we were clear with our clients about it. If a strong bidder turned up, we could lose the house. We judged that unlikely and recommended holding.
One other buyer attended, down from Sydney. We spoke with them in the crowd before proceedings started and learned their finance was not yet in place.
That single piece of information changed the entire approach. It meant that whatever happened under the hammer, we were the only party who could actually transact that day.
We didn’t bid. Not once.
Most advice at this point would be to bid conservatively and let the property pass in to you, which secures the first right to negotiate. We went further and placed no bid whatsoever.
The property passed in and we walked away from it. Then we negotiated across the rest of the day, from the position of a buyer who had shown no urgency, against a vendor whose home was sitting vacant and who now had a failed auction behind them and no other buyer in front of them.
Secured at $842,000. Twenty-eight thousand below the pre-auction offer our clients were encouraged to take, and seventy-eight thousand below the top of the quoted range, for a first home.
A pre-auction offer is information, not a favour. It tells you the vendor would rather not test the market, and that is worth knowing.
Whether to take it depends on what the auction is likely to do, which depends on the depth of competition for that property in that week. A first home buyer cannot see that. It is the difference between paying $870,000 and paying $842,000 for the same house.
Buyer advocacy by LP Advisory, Melbourne. Suburb-level detail only. Prices are indicative and shared with permission; some details withheld for privacy.
Not automatically. A pre-auction offer usually signals that the vendor would rather not test the market. In this Footscray purchase the pre-auction offer was $870,000 and the property was secured for $842,000 after auction, so accepting it would have cost the buyers $28,000.
Bidding has not reached the vendor reserve, so it does not sell under the hammer. The highest bidder normally gets first right to negotiate, but where there is no bidding at all the agent must negotiate with whoever is still interested.
Yes. Once a property passes in the vendor needs a buyer, and a party who did not bid is under no obligation and shows no urgency. In this Footscray case no bid was placed at all and the purchase was negotiated later the same day at $842,000.
The value shows up in decisions like this one. Declining an $870,000 pre-auction offer and buying at $842,000 is a $28,000 difference on a single judgement call, on a first home.
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